Feeding adult rats with a diet containing 2-acetylaminofluorene (2-AAF) results in suppression of hepatocyte proliferation and stimulation of oval cell proliferation. Although oval cells may be facultative liver stem cells, the actual relationship between oval cells and liver cancer has not been clearly established in vivo. Our goal was to label hepatic cells in vivo using retroviral vectors and follow their fate during the early steps of chemically induced hepatocarcinogenesis. Oval cell proliferation was induced by continuous feeding with a carcinogenic diet containing 2-AAF. We used two different strategies to genetically label hepatic cells: (a) labeling of proliferating cells in rats fed 2-AAF by injecting recombinant retroviral vectors containing the beta-galactosidase gene either in a peripheral vein or in the common bile duct at the peak of oval cell proliferation and (b) prelabeling of hepatocytes by intravenously injecting recombinant vectors 1 day after partial hepatectomy and 1 week before subsequent administration of 2-AAF. Using the first strategy, transgene expression occurred in both oval cells and hepatocytes. Using the second strategy, we could selectively label, and hence study the fate of, differentiated hepatocytes. In the latter case, we observed clusters of beta-galactosidase-positive hepatocytes, some of them also expressing preneoplastic markers such as gamma-glutamyl transpeptidase as well as the placental form of glutathione-S-transferase. These results demonstrate that preneoplastic foci can originate from mature hepatocytes and are consistent with the hypothesis that dedifferentiation of mature hepatocytes may occur during the course of carcinogenic regimen.